Binance's Zhao to admit guilt, step down to settle US illicit finance probe

Zhao Changpeng, founder and chief executive officer of Binance speaks during an event in Athens, Greece, November 25, 2022. REUTERS/Costas Baltas/File photo

By Chris Prentice

NEW YORK (Reuters) -Binance chief executive Changpeng Zhao will admit violating U.S. laws as part of a $4 billion settlement resolving a years-long probe into illicit finance breaches at the world’s largest crypto exchange, said two sources familiar with the matter.

FILE PHOTO: Smartphone with displayed Binance logo and representation of cryptocurrencies are placed on a keyboard in this illustration taken, June 8, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

He will also step down and plead guilty to violating criminal U.S. anti-money laundering requirements in a Seattle federal court on Tuesday, the Wall Street Journal reported on Tuesday. Reuters could not immediately verify the report.

The deal, which will resolve allegations the company violated illicit finance and money-laundering laws, involves the Justice Department, the Commodity Futures Trading Commission (CFTC) and the Treasury Department, the sources said.

The company will pay $3.4 billion to the Treasury’s Financial Crimes Enforcement Network office and $968 million to the Treasury’s sanction unit, one of the sources said.

Binance’s former chief compliance officer Samuel Lim will also be charged as part of the settlement, the other source said, adding Binance will also be required to remediate its lapses.

Lawyers for Zhao and Binance, as well as a company spokesperson, did not immediately respond to calls for comment.

A spokesperson for the DOJ declined to comment. The CFTC and Treasury Department did not respond to requests for comment.

Binance has been under the Justice Department’s scrutiny since at least 2018, Reuters reported last year, just one of a string of legal headaches it faces in the United States.

Federal prosecutors at the agency asked the company in December 2020 to provide internal records about its anti-money laundering efforts, along with communications involving Zhao, who founded the company in 2017.

The CFTC in March filed civil charges against Binance, alleging it failed to implement an effective anti-money laundering program to detect and prevent terrorist financing.

Internally, Binance officers and employees acknowledged that the platform facilitated “potentially illegal activities,” the CFTC alleged.

In February 2019, Binance’s former Chief Compliance Officer Lim received information on transactions by the militant Palestinian group Hamas on Binance, the CFTC wrote.

Zhao, a billionaire who was born in China and moved to Canada at the age of 12, said the CFTC’s “complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged.”

(Reporting by Chris Prentice; Additional reporting by Tom Wilson and Elizabeth Howcroft in London; Editing by Michelle Price and Lisa Shumaker)